Month: September 2014

Analyzing a a polished brand like Sony from the perspective of the connected consumer can help us understand its predicament and any possible solutions, as well as our own.

What makes a beautiful sound? An experienced player who can go beyond mere technique, with a good instrument, in an acoustically ideal place… Heard by someone utterly bored by the score?

The question is rather: what makes a beautiful sound, to whom? In the old, monolithic world the virtuoso should be appreciated by the cognoscenti. Anyone not able to appreciate not just the music but the hard work behind it was simply an ignoramus. And while ignorance is still not a virtue, and should not be fawned over like most mass media do, we all have the right to appreciate quality differently. Someone who doesn’t try to appreciate something is a fool; someone who tries but doesn’t find it to his liking is within his rights.

If you think everyone tries to appreciate quality here are some counterexamples: is wine foreign, “frenchie”, not something real men drink, even if it happens to taste good? Is it something that implies sophistication, which you should pour with care and ponder, even if it tastes dreadful? Or is it something you can discover to make up your own mind?

What makes a good TV? A good stereo? In the old world engineering prowess and the opinion of experts counted, never that of the consumer. And this was all the more important in a world filled with substandard products, with shysters ready to gouge innocent consumers with over priced, unreliable, toxic junk.

But then the world changed. Consumers didn’t only have the opinion of sales reps and specialized magazines, they had each other. And lo and behold, soon they could know more about the product than either the hapless store clerk or the so called expert. The topics went far beyond what even the most seasoned technician could know, for they were about what mattered to consumers, like the colour of the device under different lighting: the experts didn’t know or simply didn’t care, for an expert has a social standing among his fellow experts and cares about gigahertz, surely not about how it looks in grandma’s living room.

Our consumer might still not be a technical expert, in fact he might not know exactly what’s best for him, but he has discovered many more aspects that do matter to him, and he’s hearing about them from the horse’s mouth: other consumers just like him; and it is in this world of new expectations that companies need to compete today.

As you can expect, it’s not a pretty picture, with the vast majority of companies stuck with the tired marketing methods of the old monolithic world: Customers are asking for reliability, durability, whether a product’s colour is more yellow grey than blue grey, all companies can offer is “New!”, “Sale!” and technical details such as megapixels and gigahertz which the customer doesn’t fully understand.

The other side of the coin is that this represents a unique opportunity for companies to escape competition on price alone, particularly when facing lower cost competitors.

Old model Walkman serves as an example of Sony’s predicament: Nice sound, beautiful design; but you can’t transfer any music to the device if your computer doesn’t conform to narrow specifications.

We can try to understand the predicament for Sony and everyone else from this perspective. What made a Sony Walkman an icon but a Sony MP3 player a sales fail? What makes a Sony mobile phone an also ran?

There are other aspects such as more fierce competition, but part of the problem is that Sony has had to compete in broader experiences, and not just in products; it’s not as if the company was blind to this, and in fact took steps to incorporate content and its distribution through its purchase of movie and record companies… Only to find that the competition offered consumers the chance to download music “for free”: No piracy, no iPod boom, but by itself that doesn’t explain all of Sony’s MP3 player problems: customers who actually bought music had a terrible experience transferring it to the players because of the clunky interface, clearly the company couldn’t extend its amazing industrial design to its equivalent in software; and at the time Sony needed to go beyond this, to encourage and facilitate music discovery and purchases, which Apple eventually managed to do with iTunes.

The connected consumer has made the experiences Sony competes in even broader and deeper; it is notorious that customer’s expectations have diverged wildly from the brand’s response. What makes Sony a particularly interesting case is that the company keeps producing great products, which its customers aren’t able to discover or use fully.

The case of the accidental Sony earphones.

Take the case of a consumer who grew up with audio CDs and is suddenly faced with the dreadful prospect of worse sounding music through iPods and their included earphones: he starts looking for alternatives, and in the myriad brands stumbles upon a Sony product, which with the included earphones sounds much better. Later our consumer wants even nicer sound, and starts looking to upgrade his earphones, or even to get into headphones. He has specific questions such as “what would be a definite improvement?”, “what’s a reasonable price?”, and not being an expert is missing important variables such as “not all MP3 players can drive all headphones”. Sony’s response? New! Big bass!

But our consumer is stubborn and carries on with his investigation, during which he stumbles (seeing a pattern?) upon Sony earphones (say the XBA-4), and crucially upon other people’s experience with them. They seem interesting, but are much more expensive than what he is willing to pay, and has the nagging impression that Sony charges more just because of its brand caché. He archives this model in his head and starts to decide between a Yamaha and an Audio-Technica in his price range.

As he prepares to purchase one of these, he decides to do some last minute, quick side research: those XBA-4 wouldn’t be available locally, would they? Surprise surprise (for his local retailers usually have old and overpriced models), they are… At half price… At a stodgy department store whose web site barely works. What to do? Go with the safe models, buy from reputable online sellers, or take the risk that he’s actually buying a blender through the clunky seller, or even that his credit card details are stolen?

Our consumer takes the plunge. The earphones arrive and they sound amazing, so much so that music becomes once again a pleasure to listen to, he starts buying more music and eventually buys another MP3 player from Sony. Much to his horror he also discovers that these same earphones sound merely “ok” or dreadful when connected to his phone or his stereo, in other words even if the earphones are good the overall experience might still have been bad.

Here are some conclusions we can draw from this example, which apply to everyone:

Our product might have cutting edge industrial design and technology, but our customer’s experience around it, from when he looks for it, to when he buys it and uses it might be horrible, fraught with doubt and dangers.

Our customer has many questions which traditional marketing and our in store staff cannot answer; we could step up our staff training programs to improve technical proficiency but they would remain out of sync with our customer, and in any case his experience begins before he even sets foot in a store: by the time he gets there his mind will already be made up. Answering through the medium our customer is using, the web, would mean sales and a competitive advantage.

Our customer’s access to other consumers’ experience is opening their eyes; these are not “pundits” but regular consumers whose shared experience points the way to the important stuff as well as the myriad minutiae which make up an experience, and may not be important to everyone but are bound to be important to someone – perhaps to our customer. You can now see why those poor companies that put a blogger or Facebook jockey in charge of their social media projects have fared so disastrously.

The one size fits all approach from old marketing isn’t going to cut it when we need to respond to our thousands of customers individually. This doesn’t mean that we need to be everything to everyone, we need to establish an online brand persona through our customer’s self service experience.

Sony still needs to master research and development, industrial design, manufacturing and distribution: these are necessary but no longer sufficient. Their customer’s experience is now much wider and growing and they cannot expect technical excellence by itself to win customers over. While this may sound like a daunting task, the flip side is that it represents an opportunity for Sony to attract customers on the merits not just of its products but of the overall experience around them, something lower cost competitors will be unable to do.

The first step for Sony and the rest of us is a change in mentality: our customer is out there, already looking for our product; is he discovering the best according to his budget? Does he know where to begin? How to grow? How can we help?

The second step is to establish how we can cultivate this knowledge, at all touch points and then among our different internal departments, to then be part of our customer’s conversation on the web.

Summary: Business Analytics represents a set of tools which has evolved from Data Warehousing and Business Intelligence to Big Data, with some proposing Analytics 3.0 as the next big thing. Understanding its evolution from the perspective of the customer centric web can help us see its real value and limitations, and where we should be investing.

How can we control our business better? How can we plan for it, particularly when it’s a large enterprise with many products and thousands of customers? This question is behind the evolution not just of Business Analytics but also of many advances in IT; we can summarize its development in the following table.

Stuck at reporting, seeing past trends, not actual analysis. Expensive and difficult to use for small and medium sized businesses.

An end in itself? Correlations, not causality.

Follows data, not actual customers.

Analytics 1.0 had to innovate to gather all the information from operations, with the help from mainframes and later PCs; going from paper to computers meant a huge advantage in reducing costs, improving efficiency and controlling companies; as Davenport recalls, the most important task was always asking the right questions, to establish which information we needed to be gathering and analyzing, since these were such arduous, time and resource consuming tasks.

Most large companies use these tools in some way, although Business Intelligence has really mostly meant reporting about past operations, which is very useful but a long way from actual predictions. This sort of data gathering, reporting and analysis is still beyond the means of most small and medium sized businesses.

Analytics 2.0 means Big Data: suddenly we have tons of information available, and not just from inside the company; we could have the information for weather patterns, pay days and shopper visits to our stores; and we have the means to gather and process all that information, going from single local servers to many on the cloud, with innovations like in memory processing. Some companies such as Google, UPS and the port of Hamburg have thrived by using Big Data

Analytics 2.1, which Davenport sees as 3.0, is about the use of Big Data and the change it requires from companies to include useful information into their products. It’s useful as it completes the information loop, but it’s more of a 2.1 change because we are still talking about what companies do with all this information with respect to their internal operations and in some select cases about their products, which can result in a huge competitive advantage like for Google and Amazon, and does require changes in the organization; but there is a bigger and altogether different phenomenon going on, and that is how information access is changing our own customers.

On the web our customers are discovering many more aspects related to our products, and they are finding about them from other consumers. In many instances the purchase decision is taking place without any intervention from brands or retailers: our customers find which products best serve their needs among themselves and only contact us at the moment of purchase. Their experience is taking a whole new life after the sale, as they exchange impressions and experiences, which affect our future sales.

In the “old” 1.0, 2.0, 2.1 mentality we can track customers just like we can track our products and operations, with tons of information and processing power, to then seek to improve the efficiency of our transactions; and this is very useful and profitable, but it doesn’t deal with our customers’ new expectations. And those expectations aren’t only about our products but also about ourselves.

A useful real life example example is the poor girl who found herself looking for certain products which taken together denoted an upcoming baby: the data collected allowed Target to send her pregnancy related coupons, which had an adverse effect on her as (a) it angered her parents, which she hadn’t informed, (b) probably made her feel uneasy about being spied on, and (c) probably put her (and others who read the story) off shopping at Target: great use of statistics, complete marketing fail.

What makes the failure even worse is that our customer is more than willing to tell us what she’s looking for, if we only know how to listen and help her find what’s best for her, which goes way beyond price cuts, coupons and promotions; in fact she’s more than willing to help our other customers find what’s best for them. Making customers feel like they’re spied on and used is exactly the opposite of what’s required, which is to earn their trust, make them feel safe and valued. We need to take into account our customer’s expanded experience and our own place in it.

The wording in the NY Times magazine story is telling: Target was fishing for times when customers were “vulnerable to intervention by marketers” and wondered “How do you take advantage of someone’s habits without letting them know you’re studying their lives?”. If it isn’t already clear, customers don’t want to feel vulnerable or that they are being taken advantage of.

We don’t need “data scientists”, we need to know who our customers are, what they are looking for, why, how our product responds to their needs, how they find it, what they do with it; in other words we need to go back to the basics of marketing, now on the web. Business analytics and big data can indeed help, but they are only ingredients in the long term relationship we need to build with our customers.

Analytics 1.0.

Analytics 2.0.

Analytics 3.0.

Name.

Data Warehousing, Business Intelligence.

Use Big Data

Our customer's use of data.

What it does.

Gather and analyze operations data.

Vast data sets, much more powerful number crunching.

Understand how our customer uses data.

What we can use it for.

Manage operations better.

Incorporate useful info into our products.

Respond to our customer's new expectations.

We can take these steps to respond to our customer’s new expectations:

Establish a centralized way of learning about our customers, including all touch points from analytics and Big Data. This is also the first step for other projects such as CRM, customer satisfaction and the web.

Establish how our customer’s expectations are changing, and how we need to respond.

Establish who we want to be for our customers on the web, not just what info we can gain from them.